Valley manufacturing has different face than 10 or 20 years ago

No more steel, silk

area producing trucks, medical supplies.

Manufacturing

March 09, 2003|By Dan Shope Of The Morning Call

Steel, silk and computer chips.

All three were once kings of Lehigh Valley manufacturing. Now, of course, steel and silk are memories, and the manufacture of computer chips will cease this summer when Agere Systems shuts down its Union Boulevard plant in Allentown.

Manufacturing last year continued its decline in the Lehigh Valley. The number of manufacturing jobs in the area has fallen from 115,000 in 1974 to 49,600 in late 2002, according to the state Bureau of Labor Statistics.

Factories continue to struggle nationally, too. The industrial sector, hardest hit by the 2001 recession, has been the biggest drag on the economy's slow recovery.

Manufacturing received good news that may indicate better things for 2003. Factories in January turned in their best performance in six months. There are some bright spots locally. Now the area is known for making trucks, crayons and intravenous equipment. Companies such as Mack Trucks, Binney & Smith and B. Braun Medical have learned to adjust to the new manufacturing environment.

Perhaps best situated is B. Braun in Bethlehem, supplier of health care products such as a line of needle-free intravenous systems.

"The health care market continues to grow," said Caroll Neubauer, chairman of B. Braun, a subsidiary of B. Braun Melsungen of Germany. "We're not driven by economical factors and the economy. People get ill, and that doesn't change with the economy."

B. Braun is being hurt by rising petroleum prices. About 90 percent of its products are made with plastic.

"The cost pressure is an issue," Neubauer added. "So our volume of business is nice, but we're always looking for lower prices."

The company has grown in the past 10 years, with annual sales at $700 million in 2002, up from $120 million in 1992. Employment has doubled over 10 years. The company employs 1,950 in the Lehigh Valley, after the relocation here from San Francisco of a subsidiary, Aesculap, which employs about 350 people, said Mark Pesavento of B. Braun's employee relations office.

Neubauer, who has run the company since 1996, was born in the United States and educated in Germany. He is optimistic about the economy, and is sure recent differences between the two countries over Iraq will simmer down.

With the country geared up for war and the economy still idling, manufacturers will continue to face pressures, including the need to compete with companies across the globe.

"The international scene will have an effect on our manufacturing companies in the Lehigh Valley. Many of our companies have gone global," said Edith Ritter. She is executive director of the Manufacturers Resource Center in Bethlehem, which provides assistance to Lehigh Valley manufacturers.

Agere, the Allentown maker of microchips, will hire companies in Asia and elsewhere to handle most of its manufacturing. Bethlehem Steel was defeated by cheaper foreign steel and the weight of supporting its retired employees. Cheap foreign production also ripped apart the Lehigh Valley's needle trades.

"Today, advanced technology can be placed anywhere," Ritter said. "All communications are instantaneous. A resourceful low-wage area or country can rapidly organize in manufacturing.

"They are going to compete with our area like never seen before."

Jerry Jasinowski, president of the National Association of Manufacturers in Washington, D.C., said U.S. companies face tough challenges.

"It's no secret that some new things are going on in American manufacturing that challenges it more than we've been challenged in the last decade or two," Jasinowski said.

"It's the slowest recovery we've seen in recent times and that's due to the uncertainty associated with the war, inadequate capital spending, overvalued currency, and problems with international markets and escalating costs."

Manufacturing output during this recovery is growing at only one-fifth its historical rate during such periods, Jasinowski said.

"Something is amiss, something is wrong," he said. "Part of that is we've got to step up growth but beyond supporting growth, there are structural costs, trade and regulatory problems that are making it increasingly difficult to manage manufacturing in this country.

"That's why you see people reducing manufacturing employment over and above the effect of the recession, and that's why you see people outsourcing to places like China and Singapore."

The association expects employment in manufacturing will remain static in the first half of 2003, but should increase 15 percent in the second half.

"People have put things on hold," Jasinowski said. "There's no question we don't know what the true behavior of the economy is altogether."

The Lehigh Valley is on a similar track as the rest of the nation. "We're very much dependent on an external event in Iraq," said Bethlehem economist Kamran Afshar. "In the best-case scenario, it will be a short war with no weapons of mass destruction. When that's over, everything will grow much faster."

But the region probably won't return to its former manufacturing prominence.

"No one wants our area to be like it was in the 1960s and 1970s, when the area had a couple of giants," Afshar said. "When they caught cold, the region got pneumonia."